Jakarta, INTI - Indonesia’s Ministry of National Development Planning (PPN)/National Development Planning Agency (Bappenas) has identified project readiness as the key factor in accelerating investment in hydropower development, enabling projects to secure financing and move into the construction phase.
Abdul Malik Sadat, Deputy for Infrastructure at the Ministry of PPN/Bappenas, said hydropower projects typically involve long development cycles, making comprehensive preparation essential from the earliest stages.
He explained that project preparation must encompass technical, environmental, social, regulatory, institutional, and financial aspects.
"It is important to implement HydroSelect and the Hydropower Sustainability Standard (HSS) from the outset to improve a project's bankability," Abdul Malik Sadat said.
HydroSelect and HSS Enhance Project Bankability
HydroSelect serves as an early-stage screening tool designed to identify 12 environmental, social, and governance (ESG) risks during the project concept and pre-feasibility phases.
Meanwhile, the Hydropower Sustainability Standard (HSS) evaluates the sustainability performance of hydropower projects throughout their preparation, construction, and operational stages.
According to Abdul Malik Sadat, adopting HydroSelect and HSS improves project quality and investment readiness, making it easier to attract financing institutions, investors, contractors, and integration into international supply chains.
Under the Electricity Supply Business Plan (RUPTL) 2025–2034, the government targets the addition of 69.5 gigawatts (GW) of new power generation capacity.
Approximately 76 percent of this capacity is expected to come from renewable energy and energy storage systems, including a target of 11.7 GW from hydropower projects.
The implementation of the RUPTL 2025–2034 is projected to unlock investment opportunities worth Rp2,967.4 trillion for power generation, transmission and distribution networks, as well as national electrification programs.
Financing and Cross-Sector Coordination Remain Key Challenges
Abdul Malik Sadat noted that international financial institutions, including the World Bank, Japan International Cooperation Agency (JICA), KfW, and the Asian Development Bank (ADB), provide sovereign loan facilities to support infrastructure projects.
However, he emphasized that funding availability alone is insufficient, as projects must also satisfy technical, institutional, environmental, social, and governance requirements.
As examples of government on-lending schemes to PLN, he highlighted the Peusangan Hydropower Plant, Asahan III Hydropower Plant, and the Upper Cisokan Pumped Storage Hydropower Project.
He explained that the Upper Cisokan project required around 15 years of preparation, illustrating the importance of aligning engineering design with financing strategies from the earliest stages of project development.
"Even state-owned project owners may not always have strong financial backing. That is why we continue to encourage diversified blended financing schemes," he said.
According to Bappenas, the 174-megawatt (MW) Asahan III Hydropower Plant became Indonesia's first hydropower project to receive HSS certification in 2026.
Abdul Malik Sadat said the achievement could serve as a benchmark for other hydropower projects to conduct self-assessments, pursue HSS certification, strengthen sustainability standards, and improve financing eligibility.
"Indonesia has now reached the same level as the international market. This first milestone has been achieved," he said.
Beyond financing, Abdul Malik Sadat identified four major obstacles to hydropower development: overlapping spatial planning regulations, mismatches between hydropower resource locations and electricity demand, institutional and regulatory challenges, and incomplete project readiness documentation.
He stressed that overcoming these barriers will require stronger coordination among ministries and government agencies, particularly on forest land utilization, land acquisition, grid connectivity, and environmental permitting.
Bappenas is also facilitating multiple financing mechanisms through the Blue Book, Green Book, Public-Private Partnerships (PPP), blended financing, and potential participation from the Danantara Development Fund.
Abdul Malik Sadat concluded that accelerating Indonesia's hydropower development will depend on strengthening project readiness, resolving cross-sector challenges, and adopting internationally recognized best practices to transform the country's vast hydropower potential into reliable electricity that supports national energy security and the transition to a cleaner energy future.
Conclusion
Strengthening project readiness through international sustainability standards, diversified financing, and cross-sector collaboration is essential for accelerating hydropower investment. By improving bankability and removing regulatory barriers, Indonesia can unlock its hydropower potential to advance energy security and achieve its long-term clean energy transition goals.
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